Full Force Life Insurance: Maximizing Your Coverage And Benefits

Life insurance is a legally binding contract between an insurance company and a policy owner, in which the insurer agrees to pay a sum of money to one or more named beneficiaries when the insured person dies. The policyholder must pay a single premium upfront or regular premiums for the policy to remain in force. In the context of life insurance, in force means that the policy is active and that all premiums have been paid. If the insured person dies, the insurance company will pay out the death benefit to the beneficiaries. Term life insurance policies expire after a certain number of years, while permanent life insurance policies remain in force for the duration of the insured's life, provided that the policyholder continues to pay the premiums.

In force means the policy is active

When it comes to insurance, the term "in force" is used to describe a policy that is currently active and providing coverage to the policyholder. In the context of life insurance, "in force" means that the policy is active and has been paid for. This means that the policyholder has been paying their premiums according to the agreed-upon payment schedule.

The status of a policy as "in force" is evaluated at a specific point in time. If a policyholder has been regularly paying their premiums or has paid the policy in full, the policy is considered "in force", and the policyholder is entitled to its benefits. The length of time that a policy remains in force, as well as the conditions under which it will lapse or be voided, are typically outlined in the insurance agreement.

Maintaining a life insurance policy "in force" is crucial to ensure that, in the event of the policyholder's premature demise, their beneficiaries will receive the death benefit as intended. If a policy is not "in force", the coverage is invalid, and the insurance provider will not pay out the face amount of the policy.

In the context of insurance companies and agents, the term "in force" is used to showcase their financial strength and stability. When an insurance company states that they have a certain amount of life insurance "in force", they are referring to the total sum of active coverage provided by the current policies they have issued. This indicates that the company is financially secure and trustworthy.

It is important for policyholders to have a comprehensive understanding of their life insurance plan and its associated terms. This ensures that there are no gaps in coverage, and the benefits they expect to be insured will indeed be covered.

Coverage applies if premiums are paid

Life insurance is a legally binding contract between an insurance company and a policy owner. The insurance company guarantees to pay a sum of money to the policy's beneficiaries when the insured person dies. In exchange, the policyholder pays premiums to the insurer during their lifetime. The best life insurance companies have good financial strength, low customer complaint numbers, high customer satisfaction, and optional riders, among other things.

The term "in force" is often used when discussing insurance policies. It is used to indicate that an insurance policy is active, and the premium has been paid. The policyholder keeps their insurance "in force" by continuing to pay the premium. Once someone purchases a life insurance policy and starts paying the premium, their policy is considered "in force." The coverage amount that is currently active is what earns this special title.

The sum total of the policyholder's life insurance coverage that is paid and active accounts for how much coverage is "in force." For example, if a policyholder has a $500,000 term life insurance policy and a $250,000 whole life insurance policy, and they have paid the premiums for both policies, they have a total of $750,000 of in-force life insurance.

The term "in force" is also used by insurance companies and insurance agents. Insurance companies may state that they have a total of $2 billion of life insurance in force, meaning they have issued enough current life insurance policies to reach a sum total of $2 billion worth of coverage. For this claim to be true, all policyholders must have paid their premiums to keep their coverage active.

It is important to keep life insurance in force in case of unexpected death. Otherwise, your beneficiary won't receive the financial assistance intended for them. If a life insurance policyholder dies after allowing their coverage to lapse, the insurance company will not pay out their death benefit to the beneficiary.

Life insurance premiums are determined using factors such as age, health, policy type, and coverage limits. The younger and healthier you are, the lower your premium will typically be. Women may pay lower life insurance premiums than men, as they tend to live longer. Life insurance companies also consider your height and weight when assessing your application. Overall, the healthier you are, the less you will likely pay for your life insurance policy.

Life insurance companies use the money from premiums to cover liabilities, claim payouts, business expenses, and investments. It is important to note that if you miss premium payments, the consequences depend on the policy type—term or permanent. Each comes with a grace period during which the policy remains active despite missed payments.

Lapsed policies can usually be reinstated

Lapsed life insurance policies can usually be reinstated, but the process and requirements vary by insurance company. It's important to act quickly, as reinstatement is generally easier and cheaper the shorter the time since the policy lapsed.

Reinstatement Process

Reinstating a policy means that it becomes active again and will provide the coverage outlined in the policy and pay a death benefit. In most cases, you can reinstate your life insurance policy within a certain time frame by making premium payments again and meeting certain requirements.

Time Since Lapse

The reinstatement process and requirements depend on how much time has passed since the policy lapsed. Here are some common conditions for reinstatement:

30 Days or Less

Most insurance companies allow reinstatement without any underwriting or questions. You will need to fill out a reinstatement application and catch up on the premiums.

30 Days to Six Months

In addition to the reinstatement application, most insurers will require you to answer a few health questions and sign documents stating that no material changes to your health have occurred since the original policy was approved. Misrepresenting your health status may result in a denied claim.

90 Days to 5 Years

Your options can vary greatly in this time frame, so it is best to talk to your insurance company. The majority of insurers will let you reinstate the policy for up to five years, but you will likely have to submit to a new medical exam.

Over 5 Years

After a certain amount of time, usually three years, you will need to purchase a new contract.

Requirements

Most insurers will require the following when reinstating a lapsed policy:

• Payment of all past-due premiums, plus interest if applicable
• Payment of any outstanding loans on the lapsed policy
• Evidence of insurability, such as an updated medical examination

Benefits of Reinstatement

Reinstating a lapsed policy is often cheaper than purchasing a new one, as life insurance costs increase dramatically with age.

Permanent life insurance stays in force for the insured's entire life

Permanent life insurance is a type of insurance that provides coverage for the full lifetime of the insured person. It is more expensive than term life insurance but remains in force throughout the insured's entire life, provided that the policyholder continues to pay the premiums. Permanent life insurance policies combine a death benefit with a savings component, allowing the policy to build cash value over time. This cash value can be borrowed against or withdrawn by the policyholder to meet expenses such as medical bills or a child's education.

The two primary types of permanent life insurance are whole life and universal life. Whole life insurance policies have fixed and guaranteed premiums, rates of return on cash value, and death benefits. The cash value of whole life insurance grows at a guaranteed rate. Universal life insurance, on the other hand, offers more flexible premium options, and its earnings are based on market interest rates.

Permanent life insurance policies enjoy favourable tax treatment. The cash value generally grows on a tax-deferred basis, and withdrawals up to the total of premiums paid are typically not taxed. Additionally, the death benefit paid to beneficiaries is usually tax-free.

While permanent life insurance is more costly than term life insurance, it offers the advantage of lifelong coverage and the opportunity to build savings with tax benefits. It is a good option for individuals who want to ensure a death benefit payout for their loved ones regardless of when they die.

In-force illustrations show the status of permanent life insurance policies

Permanent life insurance policies are complex financial instruments with many variables that impact their performance. Permanent life insurance policies that offer cash value components include whole life, universal life, variable life, and indexed life insurance.

An in-force illustration is the only way to gauge the potential future performance of a permanent life insurance policy and to see if changes are needed to avoid problems. An in-force illustration uses current policy values (cash value, death benefit, and loan balance) and projects future values based on current earnings (interest rate/dividend that helps grow your cash value), mortality (the actual cost of the life insurance for you), and expense charges (the insurer's fees).

The in-force illustration will help you determine if any modifications will impact your life insurance policy. For example, if your cash value is unexpectedly depleted by costs and charges, the policy could terminate earlier than expected. To avoid that, you may suddenly find that you need to pay premiums for a longer period or substantially increase the premiums you're paying to keep the life insurance policy in force.

In-force illustrations can be obtained on a life insurance policy that is in force, or active. In other words, you can't get one for a policy that has lapsed or is no longer in force. The best life insurance companies will be able to present you with an in-force illustration for your permanent life insurance policy.

The in-force illustration will show you:

• Your accumulated value
• Your cash surrender value (the amount you'd receive if you cashed it in)
• Your scheduled premiums for future years
• Your current death benefit (how much your beneficiary would receive if you died)
• Your projected cash values and death benefits for future years

You can request an in-force illustration through your life insurance agent or directly from your insurance company. The request can be made over the phone or in writing. Some insurance companies will allow you to request in-force illustrations through a customer portal. The request must be made by the policy owner.

It's important to request an in-force illustration every two to three years because your policy components will continue to fluctuate. You should also request an in-force illustration when you are considering making a change to the policy, such as missing a premium payment, taking out a policy loan, or taking a cash withdrawal.

Frequently asked questions